Greetings. Welcome to Apple Hospitality REIT First Quarter 2026 Earnings Call. Operator provided instructions. Please note this conference is being recorded. I will now turn the conference over to Kelly Clarke, Vice President, Investor Relations. Thank you. You may begin.

Good morning, and welcome to Apple Hospitality REIT's First Quarter 2026 Earnings Call. Today's call will be based on the earnings release and Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions, and as a result, are subject to numerous risks, uncertainties and the outcome of future events that could cause actual results, performance or achievements to materially differ from those expressed, projected or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2025 annual report on Form 10-K and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer; and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the first quarter 2026 and an operational outlook for the remainder of the year. Unless otherwise stated, all changes in performance metrics refer to year-over-year changes for the comparable period. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning, and thank you for joining us today for our first quarter 2026 earnings call. We are pleased to report a strong start to the year with comparable hotels RevPAR growth of more than 2% despite challenging year-over-year comparisons to the first quarter of 2025. Underscoring the strength of the quarter, approximately two-thirds of our hotels delivered RevPAR growth. And on a same-store basis, RevPAR grew nearly 3% with margin expansion. The efficient operating model of our hotels, combined with our prudent management of expenses, enabled us to deliver meaningful flow-through of top line improvements to bottom line performance, resulting in growth across comparable hotels adjusted hotel EBITDA, adjusted EBITDAre and modified funds from operations. Demand momentum has continued into the second quarter. Preliminary reports for the month of April indicate comparable hotels RevPAR growth of over 4%, supported by continued strength in demand and the benefit of favorable year-over-year comparisons related to the negative effects of DOGE, Liberation Day and the resulting general macroeconomic uncertainty. While the ongoing conflict in the Middle East and its effects on global energy markets adds to an uncertain geopolitical and economic backdrop, our broadly diversified rooms-focused portfolio continues to demonstrate demand resilience. Improving occupancy and forward booking trends give us confidence heading into the summer months. Reflecting our year-to-date outperformance, we are raising our full year RevPAR guidance 100 basis points to 1% at the midpoint. The revised range maintains a measured view of the year ahead, and we believe it could ultimately prove conservative. Transient demand has been stronger than anticipated. Early summer performance may benefit from incremental leisure travel tied to the FIFA World Cup, and we are beginning to lap periods negatively affected by reduced government spending, tariff-related disruption and last year's government shutdown. Taken together, these factors represent potential upside not fully reflected in our updated outlook. Disciplined capital allocation has been central to our success over decades in the lodging industry. We prudently balance near- and long-term investment decisions to capitalize on current opportunities while positioning for the future. Over time, this approach is designed to deliver compelling total returns to our shareholders through durable earnings growth and long-term capital appreciation. In April of this year, we completed the sale of our Hampton Inn & Suites in Rochester, Minnesota for approximately $9 million. The sales price represents a 5% cap rate or 14.5x EBITDA multiple before CapEx and a 4% cap rate or 19.6x EBITDA multiple after taking into consideration an estimated $3 million in anticipated capital improvements. We continue to see opportunity to selectively prune our portfolio through transactions that enable us to reinvest proceeds in ways that enhance returns for our shareholders. Recent acquisitions have performed well despite headwinds in several markets. The Embassy Suites in Madison, Wisconsin saw meaningful improvement as the hotel completed its first full year of operations. The AC Hotel in Washington, D.C., also acquired in 2024, produced full year 2025 RevPAR of $205 and a 43% house profit margin, solid results given the meaningful pullback in government travel and weaker convention calendar last year. The Nashville Motto, which recently received Hilton's New Build of the Year Award for the Motto brand, continues to ramp well with average RevPAR approaching $200 over recent weeks. And the Homewood Suites Tampa-Brandon acquired last year continues to produce strong yields in advance of a full renovation and repositioning planned this summer. Turning to out-year commitments. We continue to have forward contracts for two projects in early stages of development, an AC in Anchorage, Alaska and a dual brand AC and Residence Inn located adjacent to our SpringHill Suites in Las Vegas. The AC in Anchorage has broken ground and is expected to be delivered in late 2027. Construction has not yet begun on the Las Vegas project. The dual brand AC and Residence Inn are currently expected to be completed in the second quarter of 2028. The current transaction environment does not yet support accretive opportunities relative to our cost of capital, and we do not currently have any agreements for acquisitions in 2026. Consistent with our disciplined approach, we remain actively engaged in the transaction market, evaluating potential hotel acquisitions relative to other uses of capital with a focus on maximizing long-term value for our shareholders. As we have continuously demonstrated over the years, the flexibility of our balance sheet and our reputation for strong execution puts us in a position to act quickly when market conditions shift to be more favorable. We also continue to strategically reinvest in our portfolio, ensuring that our hotels remain competitive within their respective markets and maintain a strong value proposition for our guests. For the full year, we expect to reinvest between $80 million and $90 million, including major renovations planned at 21 hotels. The scale of our portfolio, efficient design of our rooms-focused hotels and our experienced in-house project management team enable us to maintain our assets with average annual CapEx spend of approximately 6% of revenues, significantly lower than full-service portfolios. Combined with stronger operating margins, this efficiency translates into substantial free cash flow from operations, which we use to fund shareholder distributions and strategic investments. For the quarter, capital expenditures totaled approximately $27.5 million. Supported by strong cash flow from our diverse portfolio of hotels, we continue to return capital to shareholders through attractive monthly distributions, which contribute to total returns. During the first quarter, we paid distributions totaling approximately $57 million or $0.24 per common share. Based on Friday's closing stock price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 7.2%. Together with our Board of Directors, we will continue to evaluate these distributions in the context of portfolio performance, capital needs and other accretive opportunities to create long-term shareholder value. Throughout our 26-year history in the lodging industry, we have refined our strategy with intention. We invest in high-quality hotels that appeal to a broad set of business and leisure customers. We diversify our portfolio across markets and demand generators. We maintain a strong and flexible balance sheet with low leverage. We reinvest strategically in our portfolio, and we work closely with the experienced management teams who operate our hotels. We own one of the largest, most diverse portfolios of upscale rooms-focused hotels in the United States: 216 hotels with almost 30,000 guest rooms diversified across 83 markets in 37 states and the District of Columbia. Travel demand for our portfolio has remained resilient with meaningful growth in recent months, reinforcing the merits of our strategy. We continue to believe that historically low supply growth from new hotel construction in our markets materially reduces the overall risk profile of our portfolio, limits potential downside and enhances potential upside. At quarter end, 57% of our hotels did not have any new upper upscale or upper mid-scale product under construction within a 5-mile radius. We have confidence in the outlook for the hospitality industry and in the strength and positioning of our portfolio. As we look ahead, we will continue to focus on the things within our control, operational execution, disciplined capital allocation and an uncompromising commitment to integrity. Above all, we are committed to creating lasting value for our shareholders. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter and outlook for the remainder of the year.

Thank you, Justin, and good morning. The first quarter was a strong start to the year with our portfolio demonstrating the durability of our operating model. We are especially pleased with our performance relative to initial expectations that Q1 would be our weakest quarter in the year. With a strong finish to February and acceleration into March, we ended the quarter with RevPAR growth exceeding the high end of our initial full year guidance range. For the quarter, comparable hotels RevPAR was $115, up 2.2%. ADR was $157, up 0.1% and occupancy was 73%, an increase of 2.1%. Performance improved as we moved through the quarter. In January, comparable hotels RevPAR was down 1.6%, reflecting a challenging comparison to the same period last year, nearly half of which was attributable to wildfire-related recovery business in early 2025. Excluding our California hotels that saw benefit, first quarter RevPAR grew 3%. In February, comparable hotels RevPAR increased by 1.5%, supported by strengthening business and leisure demand despite some weather disruption. March performance was particularly noteworthy with comparable hotels RevPAR growth of 5.8%, well ahead of expectations and indicative of broad-based demand strength across the portfolio, extending beyond the early effects of policy-driven demand headwinds experienced last year. For the quarter, comparable hotels total revenue was up 4.3% to $337 million, supported by continued strength in other revenues, which were up 10%. The efficient operating models in our hotels, combined with disciplined expense management, drove strong flow-through from top line growth to bottom line results. For the quarter, we delivered comparable hotels adjusted hotel EBITDA of $108 million, up 3.6%, and an adjusted hotel EBITDA margin of 32.2%, a reduction of just 20 basis points. Results reflect the ongoing ramp of our recently opened Motto Nashville Downtown and the seasonal impact of Hotel 57, both of which weighed on overall comparable hotels results. On a same-store basis, which excludes the impact of the Motto Nashville Downtown, the transition of Hotel 57 and our recently acquired Homewood Suites Tampa-Brandon, RevPAR grew by 2.8% for the quarter. Same-store total revenue grew 3.1%, supported by continued strength in non-room revenues, which grew 6% in the quarter. Strong top line growth, combined with disciplined cost management, drove same-store adjusted hotel EBITDA growth of 4.2% and 30 basis points of adjusted hotel EBITDA margin expansion. These bottom line results are especially encouraging given the ADR headwinds we faced during the quarter and the disruption and transition expenses associated with converting our Marriott-managed hotels to franchise. As we move into seasonally higher occupancy months, stabilize recently transitioned hotels and see greater contribution from rate growth, we would expect even stronger flow-through to the bottom line. As highlighted in January, we completed the transition of our 13 Marriott-managed hotels to franchise, consolidating management with third-party management companies who, in most instances, were already operating hotels for us in market, enabling us to realize incremental operational synergies. While still early, we are encouraged by the initial results and remain confident these transitions, together with a select number of additional market-level management consolidations, will further drive operating performance for our portfolio. The transition also provides us with additional flexibility and enhances the marketability of these hotels as we evaluate select dispositions in the future. The broad-based strength across our portfolio was noteworthy during the quarter. As Justin highlighted, approximately two-thirds of our hotels delivered RevPAR growth year-over-year despite several markets having challenging comparisons, including wildfire-related recovery business benefiting our California hotels in early 2025 and the inauguration in D.C. This reflects both the diversification of our portfolio and our team's continued focus on hotel and market level execution. Several of our markets stood out as top RevPAR performers in the quarter. Pittsburgh grew 23%, benefiting from multiple sporting events and a strong convention calendar. Alaska grew 21%, driven by strong leisure demand in market, further aided by incremental crew business. Seattle grew 18% with the return of Boeing production business and additional project-related business at a nearby shipyard. Palm Beach grew 16%, continuing to flourish with both strong leisure and business transient demand. And Memphis grew 14%, capturing incremental medical personnel and airline crew business amid increased government demand in market. Based on preliminary results for the month of April, comparable hotels RevPAR increased by over 4%. Despite the ongoing benefit in 2025 from the wildfire recovery business in Southern California, we continue to see broad demand strength across our portfolio and additionally benefited from favorable comparisons over a challenging April 2025, which experienced disruption from government policy-related announcements. Turning back to the first quarter, weekday occupancy was up 170 basis points and weekend occupancy was up 270 basis points. Weekday occupancy followed the same monthly pattern as overall results, down 200 basis points in January, up 200 basis points in February and up over 400 basis points in March. Weekend occupancy was positive throughout the quarter, up 100 basis points in January, 200 basis points in February and nearly 500 basis points in March. ADR trends also strengthened as we moved through the quarter. After negative ADR growth in January and February, weekday ADR turned positive in March, up 1.4%, finishing the quarter up 30 basis points. Weekend ADR was up 3.5% in March and up 70 basis points for the quarter, a meaningful positive inflection that contributed to the broader RevPAR gains. Excluding our L.A. and D.C. markets, which faced challenging comparisons year-over-year related to wildfire recovery and inauguration business, both weekday and weekend ADR grew over 1% for the quarter, indicative of our ability to drive rate growth alongside occupancy in our portfolio. Looking at same-store room night channel mix, the quarter illustrated improvement in transient trends. Brand.com remained our largest channel at 39% of room nights, up 40 basis points year-over-year, while OTA bookings were up 170 basis points to 13% of mix. Property direct declined 90 basis points to 26% and GDS bookings declined 90 basis points to 18%. Turning to segmentation. Transient trends improved each month, while group business remained strong and provided a strong base that helped us grow overall occupancy. BAR led the way with impressive room night growth, particularly in February and March, growing 120 basis points to 34% of our occupancy mix in the first quarter. Other discounts were more steady, declining 50 basis points to 27% of mix. Corporate and local negotiated declined 130 basis points to 17% of mix, but showed steady improvement throughout the quarter and contributed to overall March results. Government grew 20 basis points to 6% of mix, largely driven by comparisons to disruptions in March 2025. Group business mix improved 30 basis points to 17%. Turning to expenses. Same-store hotels total hotel expenses grew 2.6% in the quarter, down slightly to last year on a CPOR basis. Expense discipline was a meaningful contributor to our margin performance in the quarter. Same-store variable hotel expense per occupied room grew just 0.3% year-over-year. Total payroll per occupied room was $43, up just 1%. We also continue to see reduced reliance on contract labor, which fell to under 7% of total same-store wages, a decline of 80 basis points or 7% year-over-year. Non-payroll variable expenses declined 10 basis points on a per occupied room basis and fixed same-store hotel expenses declined 1.5%, driven by a favorable property insurance comparison and property tax appeals. For the quarter, we achieved adjusted EBITDAre of approximately $101 million, up 2.2%, and MFFO of approximately $80 million or $0.34 per share, up 1.9% and 3%, respectively. Turning to our balance sheet. As of March 31, 2026, we had approximately $1.6 billion of total debt outstanding, approximately 3.4x our trailing 12-month EBITDA with a weighted average interest rate of 4.6% and a weighted average maturity of approximately 3 years. At quarter end, approximately 63% of our total debt was fixed or hedged. We had approximately $8 million of cash on hand and $559 million of availability under our revolving credit facility, providing meaningful liquidity. At the end of the first quarter, we had 207 unencumbered hotels in our portfolio. Conversations are ongoing with our unsecured lenders regarding the scheduled debt maturities for this year, and we are confident we are well positioned to address those maturities on attractive terms. Building on our strong first quarter, we are raising our full year outlook. Consistent with the measured approach we took when we initiated guidance, we have continued to be thoughtful in our expectations for the balance of the year, recognizing the economic and geopolitical uncertainty in the broader environment while remaining confident in the underlying strength of our portfolio. For the full year, we expect net income to be between $143 million and $169 million, comparable hotels RevPAR change to be between 0% and 2%, comparable hotels adjusted hotel EBITDA margin to be between 32.9% and 33.9% and adjusted EBITDAre to be between $436 million and $458 million. We have assumed for purposes of guidance that total hotel expenses will increase by approximately 3% at the midpoint, which is 2% on a CPOR basis. We remain confident in our operating model and the ability to manage expenses and are pleased to share we achieved a favorable property insurance renewal last month, which will generate incremental monthly savings compared to our initial expectations. As a reminder, effective January 1, 2026, the company began excluding from the calculation of adjusted EBITDA and MFFO the expense recorded for share-based compensation as it represents a noncash transaction and the add back to net income is consistent with the calculation of adjusted EBITDA for the company's financial covenant ratios under its credit facilities and consistent with the presentation of other public lodging REITs. Demand for our broadly diversified rooms-focused hotels have proven resilient. With recent stronger-than-anticipated transient demand, early summer potentially benefiting from incremental leisure travel related to the FIFA World Cup and easier comparisons to periods adversely impacted by cuts in government spending, tariff announcements and the government shutdown in 2025, we acknowledge that our revised guidance could continue to prove conservative. Our outlook is based on our current view, which is limited and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions. Recent improvements in occupancy and booking trends highlight the resiliency of travel demand overall and the strength of demand for our hotels specifically. Our recent capital allocation decisions and portfolio adjustments have enhanced our portfolio positioning and performance, and our solid balance sheet continues to provide us with stability and meaningful flexibility to pursue accretive opportunities in the future. We are confident with the experience, discipline and agility of our teams, the broad consumer appeal of our portfolio and the strength and flexibility of our balance sheet. We are well positioned to successfully navigate changing market conditions and capitalize on emerging opportunities to deliver growth and maximize total returns for shareholders over time. That concludes our prepared remarks, and we'll now open the call for questions.

Our first question is from Austin Wurschmidt with KeyBanc Capital Markets.

It's Josh on for Austin. So to the extent that you do see more ADR growth moving forward, does the margin guidance assume RevPAR growth is driven entirely by occupancy? Or is it a composition of the two? And if it was entirely driven by ADR, what would that imply for flow-through?

That's a good question. And I think generally as we think about guidance, we are looking at the most recent trends and speaking to the impact of ADR headwinds from last year impacting our margin performance in the quarter. And as we lap those comps from last year, specifically related to the L.A. wildfires, we anticipate we'll be able to drive more rate. That is not entirely built into the guide. When we look to revise guidance for Q1, given how close in proximity it was to when we reported at year-end and the fact that we're still early in the year, we took a more measured approach and really, for the most part, exclusively incorporated the outperformance of Q1 and some improvement in April as well. And so the balance between occupancy and ADR for the remainder of the year as far as guidance goes at the midpoint is still a split, very similar to what we had anticipated at the beginning of the year. But should trends continue and should we continue to see more broad-based demand improvement, we do anticipate, as we lap those comps, an ability to drive rate as we've demonstrated if you exclude those comparisons from even actual results through Q1 and into April.

Okay. That's really helpful. And then my second question is around the price sensitivity around the consumer. So I guess what are you seeing from that perspective? And then with the macro risks that are currently out there, what could a potential impact on the consumer look like from a demand perspective within your portfolio? Or I guess more broadly, like what are the possible scenarios that you consider at the low end of guidance? And I'd also be curious to know the flip side of that around what you assumed at the high end.

Sure. We are not currently seeing significant price sensitivity with our customers. As Liz highlighted in her prepared remarks, as we move through the quarter, we were able to grow both occupancy and rate. And the primary weight on overall ADR growth for the portfolio was the year-over-year comps with both the inauguration, which is a high rate event in D.C., and wildfires, which drove rates in the L.A. area. I think as we look forward to the remainder of the year, as Liz highlighted, we've taken a very conservative approach to guidance for the remainder of the year. And really, what's implied there is very limited growth either in occupancy or in rate. And we recognize that, that is counter to our most recent experience and likely conservative. As we think about how things play out for the remainder of the year, we will be moving shortly into higher occupancy months and anticipate that growth during those months will come increasingly from rate, which will drive incremental margins. And really given the price point for our hotels and perceived value associated with them, we don't anticipate absent a meaningful pullback in demand, broadly speaking, any challenges related to our ability to drive rate on the margin.

Our next question is from Jay Kornreich with Cantor Fitzgerald.

You're referencing a lot about how guidance could be conservative, and you mentioned some of the additional components of lapping the easier government demand comps from last year as well as tariffs in addition to some of the potential upside from the World Cup leisure demand. So I guess in those specific areas, I wonder if you could just unpack those a bit more in terms of, I guess, what your potential upside could be from those? And within the government demand, I think that was really your main headwind last year. So as that came back strongly in 1Q, do you see that continuing to be strong throughout the year?

We're certainly encouraged by the improvement in government demand that we've seen as we lapped the most or the earliest comps from last year from the impact of DOGE and Liberation Day. So we are hopeful that we'll see that continue. Remembering too that as we move into higher occupancy months, should there be broader-based demand or special event compression, we could choose to yield that out, which could make some of our year-over-year comparisons hard to draw meaningful conclusions from if we choose to yield it out. But at this point, given where occupancy levels were for the first quarter, particularly once we entered March and then April, we were able to take incremental government demand and saw improvement around 13% and from a mix perspective approached around 6%. So encouraged from a government perspective. As we move through the year, we did see government steadily improve. And when I say that, the decline year-over-year decreased as we moved into the summer months and then, of course, increased when we had the government shutdown in the fourth quarter. And so I think that the comps as we move throughout the year will be a little bit fluid. But again, encouraged initially by seeing that improvement in group.

And remembering, again, when we issued guidance in the beginning, we anticipated that first quarter would be our most difficult quarter and that we would see improved performance after that. I'm certainly incredibly pleased with how we performed in the first quarter. And our current guidance does not include potential upside from World Cup, though we have seen strong bookings, especially in some of our smaller markets, which we do anticipate would be incremental to the strong demand trends that we're already seeing.

Okay. I appreciate that. And maybe just following up on your last comment, Justin, just about some of the World Cup bookings you've already seen. Is that largely coming from where you have exposure to markets where games are being played? Or I think as we've talked about before, the potential for international travelers extending stays, traveling in the U.S. for a week or two and maybe some additional markets where you have exposure to. Just any lens of insight into where you expect that and where you've already seen some demand?

It's difficult to determine specifically what's driving demand in markets outside of markets that will benefit from FIFA games. That said, when we look at current bookings, a very small percentage of our current bookings are international. That's consistent with past experience. The bulk of what we have on the books now is domestic, and we continue to anticipate that will be a primary driver. Should we see, as we get near to the games, an uptick in international bookings, that would be incremental.

Our next question is from Aryeh Klein with BMO Capital Markets.

Justin, you talked a little bit about, obviously, the conservative nature of the guide, but also that you're seeing positive forward booking trends. Curious if you can just unpack a little bit more about what you're seeing from a forward booking standpoint. It doesn't seem to be reflected in the guide, but it would be helpful just to get a sense of what you're seeing.

I mean, very consistent with what Justin said. As we look forward, we are beginning to see—we typically look 90 days out or sort of rely more on what's closer in than further out. And within the 90-day window, you're starting to see certainly some impact from the advanced bookings around World Cup, which is positive. And as we—even as we enter June, thinking about May outside of the calendar shift, that looks positive as well. So from a forward bookings perspective, we are continuing to see improvements around occupancy and rate as we look forward.

And then maybe just on the transaction market, can you just talk a little bit about what you're seeing there and maybe what you need to see to get more active on the transaction acquisition front?

Absolutely. I think debt markets have been supportive of transactions for some time. With improving fundamentals, we are beginning to see more interest in the space. And I think for some time there has been a lot of product on the market that would be attractive to us. The challenge has been a meaningful gap between seller expectations and what we would be willing to pay. We've spoken about this in the past, but our acquisitions model runs a comparative analysis to alternative uses of capital, including share repurchases. And as we look at the environment today and pricing for individual assets relative to the implied value or implied multiple in our stock, our stock still screens better. I think as we think about an environment where we would get more aggressive from an acquisition standpoint, it would be an environment where that reverses. And that could happen either as a result of continued improvement in our share price or a reduction in expectations from sellers. And the most likely scenario is a combination of both. And as I highlighted in my prepared remarks, given our history in the space and the flexibility that we have with our balance sheet, as the environment shifts, we're poised to move very quickly.

Our next question is from Michael Bellisario with Baird.

My question is for you on the cost side. So two parts here. One, could you quantify the insurance savings and/or how much that's boosting your outlook? And then also just with expenses still at plus 2% per occupied room, is the right way to think about it now we're sort of in a steady state? Or are there other puts and takes looking at that, that might cause that 2% number to either inch higher or inch lower?

Okay. I'll answer the first part. Related to the property insurance renewal, what we assumed beginning in the second quarter through the end of the year was about a $900,000 improvement to the forward guidance for the last three quarters. So that's a little less than half of the incremental bottom line impact outside of truing up year-to-date. The other portion comes through April improvement on the top line and flow through there. And then from an expense perspective, we've guided to how the properties have been operating from a cost control perspective. We've gotten very granular from an individual line item perspective and believe that what we've provided is a good run rate. Now certainly if the environment was to shift and a cost line item or something was to materialize differently than what we've anticipated, that could potentially impact how we thought about expenses. But we've had a good trend of very good cost controls and see some improvement on the property insurance line for several years now. And outside of the fixed cost real estate tax comps from last year have seen some good appeals and some steady run rates there too. So we're encouraged about what we've seen from an expense management perspective, and that's certainly factored in here.

Our next question is from Ken Billingsley with Compass Point.

I have a question. I'm going to follow up on the M&A side, maybe from the opposite side. I know you talked about targets necessarily not fitting what you're looking for. But can you talk about maybe inbounds and what you're seeing in requests for properties you would be interested in selling?

Certainly. And I think for clarification, we've spoken to this at some length in the past. But we're continually in market, both underwriting potential acquisitions and testing potential dispositions. And since—well, over the past several years, we've tested the market with both individual assets and portfolios looking to gauge pricing and have executed where we've been able to achieve pricing that's most attractive to us relative to alternative uses for proceeds from those sales. I think in any environment we also—from time to time we see inbounds. I can tell you as we test the market today, we're generally seeing an increased number of potential buyers. So increased interest with a large number of people signing confidentiality agreements, seeking data for the individual assets. And really, I think absent the war or the conflict in the Middle East and fears related to potential impact on energy prices, we would be seeing an even more active market with buyers interested in assets. Should we continue to see growth industry-wide and specific to our portfolio, like we have year-to-date, my expectation is that the market would get meaningfully more active with buyers beginning to stretch for individual assets. And in that environment, we have in our portfolio prioritized assets for potential sale and could act quickly on that side as well as get more aggressive from an acquisition side.

Is that mix of buyer evolving?

I would say yes. Where we have been executing or successful in executing over the past several months, maybe even a couple of years, has been primarily with local owner operators who have the capacity to drive incremental margins because of their presence in market and lower operating cost model. Those buyers have tended not to be cap rate bidders. Instead, they're looking more closely at value relative to replacement costs and bidding based on a revenue multiple, which is a very different type of buyer and pricing process and has enabled us to sell at relatively low cap rates and redeploy at a meaningful spread either into our stock or into additional assets. As the market becomes more active, we would anticipate and are beginning to see signs of increased interest from smaller private equity shops with dedicated hotel practice. And then certainly to the extent we're able to sustain the momentum industry-wide that we've seen recently, our expectation is that, that would broaden to some of the larger players as well.

And lastly, I just want to ask about Pittsburgh and get an idea of on what your expectations were versus—you said it was 23% RevPAR growth in first quarter '26. But with the NFL draft exceeding expectations, can you talk about how your expectations were met or exceeded?

Generally—and it's not unique to Pittsburgh—I think we were encouraged about how many markets performed relative to our initial expectations. So I think general demand was stronger in many markets, and certainly Pittsburgh performed well relative to expectations as well.

Yes. But when you look across our portfolio—and Liz highlighted a number of markets where we saw strong double-digit growth. For Anchorage, which had an amazing year last year, to again move up double digits in the first quarter was equally—equally surprising to the positive. So I think the demand strength across our portfolio was much stronger than we anticipated through the first quarter, and as Liz highlighted, has carried forward into April.

What I was trying to get at is trying to understand if the consumer is going to travel to these events. And even though we have high expectations that they are resilient and maybe more people are likely to get out to go to these unique events that we're going to see through the remainder of the year.

I think early indications are positive on that front.

Our next question is from Chris Darling with Green Street.

Just following up on the capital allocation discussion, where is your head at in terms of incremental development takeout transactions? And how is the opportunity set for those types of deals evolving?

It's interesting, and we've been fortunate in our ability to find deals that meet our underwriting criteria. But I'll tell you, as we look across the country and as we evaluate development takeouts, the same factors that are limiting new supply in our markets make underwriting development difficult. Meaning I think in most markets cost of construction have increased faster than fundamentals for hotels have improved. And as a result, there are very few markets where development pencils broadly speaking. That said, I think our appetite for new development has always been limited, meaning we've generally targeted within $100 million a year of new development acquisitions. And so should we consider additional development projects, we would be looking beyond 2028 to future years. And we don't currently have any deals pending in that area or that regard. I think as we think about capital allocation opportunities in the near term, we continue to be focused on the existing assets and our shares. And in an answer to an earlier question, I highlighted how we evaluate those. Given that the forward commitments really are a long ways out, we have a tremendous amount of flexibility in the near term to allocate capital to accretive opportunities and then I think to fund those acquisitions as they are completed. Remembering again the structure of our development deals is such that the developer carries the project on their balance sheet and then our only cash outlay is at the time of completion.

Okay. That's helpful context all around. And then one more for me. Hoping you could elaborate on the early operating trends for your formerly Marriott-managed hotels. And if you could—I think it's 13 total properties—can you quantify what percent of overall EBITDA those hotels represent?

I will let Liz work on the second piece. We are very pleased with our progress in the transition. As Liz highlighted in her prepared remarks, there were transition-related expenses. And I think we were somewhat disappointed with sales efforts by the prior Marriott management immediately prior to our takeover of the properties. That said, the new managers have come in and moved quickly and really established themselves in the properties in a way that we think will drive positive results this year. The 13 assets, because of their location, a portion of them are meaningful. A number of them are in California markets that are higher rated markets. And we may have to get back to you with the exact percentage.

Percentage, yes. I'll have to pull it for you.

No, no worries. I didn't mean to put you on the spot with that one, but I appreciate the thoughts.

There are no further questions at this time. I would like to turn the conference back over to Justin Knight for closing remarks.

We appreciate you joining us for our first quarter earnings call. We're incredibly pleased with the way our portfolio performed during the first quarter and excited about carrying that momentum through the remainder of the year. As always, as you travel, we hope you'll take an opportunity to stay with us in one of our hotels. And we look forward to meeting with many of you as we begin interacting at some of the upcoming conferences.

Thank you. This will conclude today's conference. You may disconnect at this time and thank you for your participation.